PGP GLASS PRIVATE LIMITED VERSUS C.C.E. &  S.T.-VADODARA-II

Customs, Excise & Service Tax 

Appellate Tribunal West Zonal

Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO.3

Excise Appeal No. 10862 of 2017

 

(Arising out of OIO-VAD-EXCUS-002-COM-082-13-14 dated 28/02/2014 passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-II)

 

PGP GLASS PRIVATE LIMITED

VERSUS

C.C.E. & S.T.-VADODARA-II

 

APPEARANCE:

Shri S.S Gupta & Shri Mehul Jiwani, Chartered Accountants for the Appellant Shri Tara Prakash, Deputy Commissioner (AR) for the Respondent

 

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C.L. MAHAR

 

Final Order No. A/ 11522 /2023

 

 

 

 

RAMESH NAIR

DATE OF HEARING: 15.03.2023 DATE OF DECISION: 14.07.2023

 

 

The brief facts of the case are that the appellant are engaged in the manufacture of Soda Lime Amber empty Glass Bottles falling under Chapter Sub Heading No. 701090 of the Central Excise Tariff Act, 1985. The Government of Gujarat vide Government Resolution (GR) of 11 September 1995 announced the incentive policy sating that an industrial undertaking setting up an industrial unit in an industrially backward area with the project cost of more than Rs. 10 crores to avail sales tax  incentive under New Incentive Policy of 1995 -2000. Under the said policy the State Government implemented various incentive schemes in the form of sales tax exemption, tax deferment or composite incentives. The appellant availed the composite scheme. In the said scheme eligible units may avail of the facilities of both exemption and deferment of sales tax. Under this

 

scheme, the eligible unit will be entitled to purchase free of tax while in the case of sale of finished goods availing the benefit of sales tax deferment . Accordingly, the appellant was availing the exemption on goods purchased whereas in the case of sale of finished goods availing the benefit of sales tax deferment. Further, under the said policy industry shall have to contribute two per cent of sales tax  in case of exemption and three per cent of sales tax in case of deferment availed during the year for “ Gokul Gram Yojana (GGY)’ under the resolution No. INC/1095/2000(2)/1.

1.2  The show cause notice dated 03.01.2012 issued on the ground that the appellant  have recovered VAT/CST amounting to Rs. 8,25,09,886/- and only 3% of it amounting to Rs. 24,75,299/- has been paid to the state government against “Gokul Gram Yojana” for the period from December, 2006 to April, 2010. The remaining amount of VAT/CST of Rs. 8,00,34,587/- has been retained by them for the period from December 2006 to April, 2010. Accordingly, demand of Central Excise Duty totally amounting to Rs. 1,01,71,736/- was proposed in the show cause notice. The Commissioner vide order in original dated 28.02.2014 has confirmed the demand of excise duty, interest and penalty as proposed in the show cause notice. Therefore , the present appeal filed by the appellant.

2. Shri S.S Gupta, Learned Chartered Accountant along with Shri Mehul Jiwani, Learned Chartered Accountant appearing on behalf of the appellant at the outset submits that the unpaid VAT has been remitted by the State Government. In this regard he invites our attention to the VAT return wherein he pointed out that the VAT amount which though collected from the customers but for the same the State Government has granted the remission. Therefore, in these circumstances the same cannot be included in the assessable value for charging the excise duty. He submits that the identical issue has been considered by the Mumbai Tribunal in the case of

 

Welspun Corporation Ltd – 2017 (358) ELT 630 (Tri.- Mumbai). He also placed reliance on the following judgments:-

• ElectroluxKelvinator Ltd  Commissioner of Central Excise, Jaipur-I – 2004 (163) ELT 395 (Tri. Del)
• GrasimIndustries  Commissioner of Central Excise, Indore, – 2007

(208) ELT 336 (Tri.-LB)

• In alsa Ltd Vs. Commissioner of Central Excise, New Delhi – 1997 (90) ELT 417 (Tri.)
  • He also relied upon the CBEC Circular No. 378/11/98/-CX dated 12.03.1998 wherein it was clarified that in such situation sales tax is also considered payable by the appellant within the meaning of the provisions of Section 4 (4) (d) (ii) of the Central Excise Act, 1944. He further submits that the Learned Commissioner  while confirming the demand took the support of Hon’ble Supreme Court Judgment in the case of Super Synotex (India) Ltd – 2014 (301) ELT 273 (SC). He submits that the said judgment is not applicable to the present  He submits that the fact of the said judgment is different from the facts of the present case in as much as in the supreme court judgment the sales tax was not payable at the time of removal of goods due to exemption whereas in the present case the sale tax /VAT was very much payable at the time of clearance however, the same was remitted subsequently and due to this, the judgment of Hon’ble Supreme Court in the case of Super Synotex (India) Ltd (Supra) is not applicable.
  • He further submits that the demand is time bar in as much as the show cause notice has been issued in January 2012 and the demand of duty was raised for the period of December, 2006 to April, 2010. Thus, entire demand is barred by limitation. He placed reliance on the following judgment:-

 

• NHKSpring India Ltd – 2016 (342) ELT 498 (P &H)
• InsuconCables & Conductors  Ltd – 2016 (344) ELT 607 (Tri. Del)
• CosmicDye Chemicaal  Collector of Central Excise, Bombay – 1995

(75) ELT 721 (SC)

 

• CCE Chemphar Drug and Liniments 1989 (40) ELT 276 (SC)
• Pushpam PharmaceuticalsCompany vs. CCE Bombay – 1995 (78) ELT 401 (SC)

3. Shri Tara Prakash, Learned Deputy Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both sides and perused the  The fact is not under dispute that in the present case the nonpayment of sales tax /VAT is not on account of exemption but on account of remission granted by the State Government. The Adjudicating Authority has confirmed the demand relying on the Hon’ble Supreme Court Judgment in the case of Super Synotex (India) Ltd (Supra) whereas the said judgment was distinguished by this Tribunal in the case of Welspun Corporation Ltd(Supra) on the ground that in Super Synotex (India) Ltd (Supra) the sales tax/ VAT was not paid by the assessee on the ground that the same was exempted at the time of removal of goods whereas in the present case VAT/Sales tax was very much payable while clearing the goods and subsequently the same was remitted by the State Government. This fact is appearing in the VAT returns submitted by the appellant. This Tribunal considering the identical facts of remission of VAT/Sales tax in the case of Welspun Corporation Ltd (Supra) held that the sales tax/VAT /CST actual payable but since the same was remitted it cannot be said that the sales tax/ VAT/CST was not payable. Therefore in terms of Section 4 (4) (d)

(ii) of the Central Excise Act, 1944, the same is deducted from the assessable value. The relevant order of the Welspun Corporation Ltd is reproduced below:-

 

“5.We have carefully considered the submissions made by both the sides and perused the records.

 

• We have gone through the relevant clauses of Chapter IV-A of the Gujarat Value Added Tax Act, 2003. We find that the Government of Gujarat had declared “Incentive Scheme 2001” wherein benefits provided under Economic Development of Kutch District, Government of Gujarat, Industries of Mines Department. Subsequently under the Gujarat Value Added Tax Act, 2003, the scheme was defined as per Rules 18A, 18B, 18 C& 18D. The Respondent company opted for “Remission of Tax Scheme” and was thus eligible for the Capital subsidy in the form of remission of Sales Tax subject to the conditions to be fulfilled. After applying to the Commissioner of Sales Tax/VAT, the eligible units were issued entitlement certificate and Form 110 to make them entitle to the benefit of tax deferment or tax remission as the case may be. The subsidy in the form of remission of sales tax was in fact percentage of capital investment. The intention of the State Government was, thus, instead of granting the capital subsidy to the units setting up their manufacturing facility, the subsidy be granted by remitting sales tax amount. Separate assessment orders were thus issued by the assessing officer of the sales tax department from time to time towards the incentive scheme amount. The Competent Authority was required to necessarily pass order for remission of such tax separately for each tax period. The remission of tax is thus directly related to capital investment in fixed asset. There was no option to claim exemption from payment of sales tax. The quantum of remission was based upon the investment made in the fixed assets. The condition of the remission amongst others included to remain in production, employment of certain percentage of persons in assessee unit, and numerous other conditions as brought out in Para 9 of the impugned Order-in-Appeal.

 

• The remission amount was adjusted against the incentive amount receivable as per the Eligibility Certificate. The Sales Tax assessment orders indicated that the finished goods cleared by the appellants were assessed to full rate of tax and allowed as remission under Section 41 of Gujarat Value Added Tax Act, 2003. This shows that the Sales Tax was actually payable to the Government. The revenue has relied upon the definition of „transaction value‟ in Section 4 (3) of the Central Excise Act, 1944 and on the Board Circular No. 354/81/2000-TRU, dated 30-6- 2000 and also on judgment of Hon‟ble Apex Court in case of M/s Super Synotex case as reported in 2014 (301) E.L.T. 273 (S.C.).

 

• We find that in the present case the tax was actually payable and there was as such no blanket exemption from sales tax. The term “remission” from sales tax itself means that the sales tax was actually payable at the time of clearance of goods but was remitted at a later date by passing of assessment orders by the Sales Tax authorities. We find that Section 4(c) and (d) of the Central Excise Act, defines “transaction value” and “Place of removal” as under :-

 

“place of removal” means –

 

a factory or any other place or premises of production or manufacture of the excisable goods; (i)

 

a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (ii)

 

a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; (iii)

 

from where such goods are removed;

 

“Transaction Value” means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.”

 

In terms of above Section 4, the duty is chargeable on excisable goods on its value which is to be determined at the time and place of removal. Thus whatever transaction value of the goods prevailing at the time of its removal shall be liable to excise duty, which however shall not include the amount of duty of excise, sales tax and other taxes, if any, “actually paid” or “actually payable” on such goods. In the present case we find that the “sales tax” is “actually payable” to the Government at the time of removal of goods from the “place of removal”. The liability to pay the sales tax/VAT is not extinguished at the time of removal of goods since it is not exempted from sales tax/VAT. It is only after the

 

assessment of the sales tax officer and subject to the condition that the Respondent‟s liability to the Sales Tax is “remitted”. Thus when the sales tax/VAT is payable at the time of removal in that case in terms of Section 4(d) of the Central Excise Act, the same is not includible in the transaction value. Further the sales tax amount was adjusted against the remission granted by the sales tax authority under an assessment.

 

• The learned AR during hearing has relied upon the judgment of Hon‟ble Supreme Court in case of M/s Super Synotex (India) Ltd. – 2014 (301) E.L.T. 273 (S.C.). We find that in the impugned order the learned Commissioner (Appeals) dealt with this Apex Court judgment in paras 11, 11.1 & 11.2, which are reproduced below : –

 

I further find that the adjudicating authority while rejecting the refund claims filed by the appellants held that since sales tax has been collected and retained by them their case is covered by the Hon‟ble Supreme Court‟s Order in “11. CCE v. Super Synotex and hence their refund claims were rejected.

 

In the case of 11.1. Super Synotex India Ltd (supra) referred by the lower authority, the Apex Court held that there being an exemption from the payment of Sales Tax, the same was neither “actually paid” nor was it “actually payable”, hence the same could not be excluded from the price while computing the transaction value. However, the adjudicating authority overlooked the fact that Apex Court in this case was dealing with the Rajasthan Sales Tax Incentive Scheme of 1989. This incentive scheme was in the nature of an exemption from the levy of Sales Tax III excess of 25% of the Sales Tax leviable, and consequently the balance 75% of Sales Tax was neither paid nor was payable. In the said case before the Hon‟ble Supreme Court the issue concerned collection and retention of Sales Tax or deferred payment of Sales Tax where the tax initially collected was retained with the assessee for a certain period of years. As per the scheme of the State Government a lump-sum payment of a certain percentage of this amount of. Sales Tax collected during the years was assumed to be sufficient discharge of the entire amount so collected, thus allowing the differential amount of Sales Tax to accure to the benefit of the assessee. Hence, I find that the ratio of this ruling would not be applicable to the case of the appellants. The Instruction F. No. 6/S/2014-CX.1, Dated 17-9-2014 issued by the Board based on the ruling of Hon‟ble Supreme Court in the case of Super Synotex India Ltd (supra) also would stand distinguished for the reason that in case of the appellants the amount of Sales Tax collected and allowed to be retained was

 

deemed to be paid in view of the sub-section (7A) of Section 11 of the Gujarat Value Added Tax Act, 2003.

 

Even in the case of 11.2. CCE, Jaipur v. Shree Rajasthan Syntex Ltd. – 2015 (31S) E.L.T. 626 (S.C.) the Hon‟ble Supreme Court was seized of the Sales Tax Incentive Scheme, [1989] issued by the State of Rajasthan where full incidence of Sales Tax was allowed to be collected from the buyer, 75% thereof was retained by the respondent and the remaining 25% was paid to the State Government. Since the Incentive Scheme availed by the appellants was not of retention of sales tax but comprised of incentive equal to capital invested to be availed in any of 3 different ways as outlined at para 10.3 above. One of which i.e. its sub para (ii) is to avail incentive by way of remission of tax by retaining the amount of VAT collected and adjustment thereof as capital subsidy specified in the Eligibility Certificate equivalent to the capital investment made in fixed assets. This was further subject to the condition of re- investment of 50% of total incentive i.e. (i) to (ii) of para 10.3 above and not only (ii) incentive received in projects in State of Gujarat within a period of 10 years of the commencement of production. This is thus not an exemption of tax as was the issue before the Hon‟ble Supreme Court in the above case, I find that the ratio laid down in this judgement cannot have any bearing on the present case of the appellants. Since the incentive Scheme, 2001 for re-development of Kutch Area affected by the earthquake in the year 2001 provided for incentive to the extent of investment made by the appellants in their industrial unit set up in Kutch area, it cannot be equated with the Rajasthan Sales Tax Incentive Scheme of 1989, Hence, I find that the reliance placed by the lower authority on the Apex Court judgment in the case of Super Synotex (supra) to reject the refund claim of the appellants, is unfounded.”

 

• The Apex Court judgment of Super Synotex has already been distinguished by the learned Commissioner (Appeals) as above. However, the Revenue in the review order/appeal did not refute the above findings, therefore, now the reliance of learned AR on the judgment of Super Synotex (supra) is of no help to the Revenue.

 

• In the case in hand it is very much clear that from the Scheme as well as from the Eligibility Certificate, that the amount of Sales Tax allowed to be remitted to the respondent was towards capital subsidy. Even the requirement to re-invest 50% of the incentive in projects in the State of Gujarat further emphasizes the point that the amount of Sales Tax retained was only as capital  We further find from the

 

facts narrated in the impugned order that the incentive receivable as capital subsidy by the appellants was from the Department of Industries, whereas the Sales Tax amount collected was payable to the Department of Sales Tax but allowed to be retained and adjusted against such incentive by their very department which also granted refund of tax paid on raw materials and CST paid. This scheme was thus operated by Department of Sales Tax and accordingly Commercial tax officer has necessarily to pass order for each tax period. It implies that the State Government of Gujarat under which both the departments fall, would have put in place some mechanism whereby the incentive paid to the appellants by way of retention of Sales Tax collected from their customers and refund granted on other two items (VAT on purchases and CST) is reimbursed by the Department of Industries to the Department of Sales Tax. Hence for the above reason also we find that such amount, allowed to be remitted to the respondents as incentive which was otherwise payable to the Sales Tax department, cannot form part of the transaction value.

 

• The respondents have argued that in similar situation in case of manufacturers of fertilizers, where the subsidy was being received by such manufacturers from the Department of Fertilizers the C.B.E.& C. vide Circular No. 983/7/2014-CX., dated 10-7-2014 has clarified that subsidy is not any additional consideration flowing directly or indirectly from the buyer to the seller and hence, is not required to be included in the assessable value. Applying the same analogy to the facts of the present case and agreeing with the contentions of the respondents, we are of the view that since in the present case the remission is incentive for setting up the unit is Kutch area, the same would not form part of transaction value.

 

• The Respondent  has  cited  the  order  of  Tribunal  in  case of  CCE  Uttam  Galva  Steels  Ltd. 2015-TIOL-2242-  CESTAT-MUM

= 2016 (331) E.L.T. 261 (Tri.-Mum.). We find that the fact of that case is different from the facts in the present case, therefore, we do not incline to take any inference from the said decision of this Tribunal.

 

• We find that even sub-section (7A) of Section 11 of the Gujarat Value Added Tax Act, 2003 states that the tax that remitted is deemed to have been statutorily paid. The said provision is as under:-

 

“notwithstanding anything contained …. where tax is levied or is leviable under this Act, or any earlier law is remitted or to be remitted or deferred or is deferrable under any tax incentive scheme

 

granted by the Government of Gujarat, then tax shall he deemed to have been paid to the Government treasury… “

 

• Thus in our view, once the Sales Tax Department has assessed the Sales Tax as paid, the Central Excise Department cannot contend that since the State Government has remitted the amount back to the appellants as incentive, Sales Tax was not paid by them. Hence, we find that once the Sales Tax Department assessed the Sales Tax as paid, the condition of Section 4(3)(d) of the Central Excise Act, 1944 stands

 

• We also find that remission and exemption was separately considered by the Govt. of Gujarat. While, Section 5 of the Gujarat Value Added Tax Act, 2003 provides in sub-Section (1) thereto that sales and purchase of goods specified in Schedule I shall be exempt from tax, sub-Section (2) empowers the State Government by a notification in the official gazette to exempt any specified class of sales or purchase or sales or purchases by any specified dealer or specified class of dealers from payment of the whole or part of the sales tax. On the other hand, the scheme of remission provided for under Section 41 of the Gujarat Value Added Tax Act, 2003, contemplates that the State Government/Commissioner of Sales Tax may remit the whole or any part of the tax payable in respect of any dealer or class of dealers. It is clear from reading of Section 5(2) as also Section 41 of the Act that while Section 5 grants exemption from the levy/payment of sales tax, remission under Section 41 is granted in respect of any part of the tax payable by a dealer. In case of exemption no tax is actually paid or actually payable, whereas in the case of remission, tax is actually payable and paid which is allowed to be remitted by way of retention or by way of refund. In the instant case as already discussed above it is not that Sales Tax was not only payable but in fact it stood actually paid, as the remission was nothing but the incentive or capital subsidy which the State Government granted with respect to the investment made by the appellants in the earthquake ravaged region of Kutch of State of  Instead of recovering Sales Tax and then refunding the same as capital subsidy, the State Government had remitted the same to appellants. Consequently like CST since VAT which was payable was actually paid the same is required to be excluded from the transaction value. Hence for this reason also the sales tax remitted by the Government towards incentive of Capital investment cannot be a part of the transaction value.

 

6.In view of our above observations, we hold that the impugned order requires no interference. Accordingly, we uphold the impugned Orders.

 

The Revenue‟s appeals are dismissed. Cross-Objections and stay applications also stand disposed of.”

 

• From the above decision of this Tribunal it can be seen that the facts of the said case is identical to the case of the present matter. Therefore, the ratio of the decision of Welspun Corporation Ltd (Supra) is clearly applicable in the present case. Accordingly, following the above decision we are of the view that the demand in the present case is not sustainable.

5. Hence, the impugned order is set aside. Appeal is allowed with consequential relief.

 

 

 

(Pronounced in the open court on 14.07.2023)

 

 

 

RAMESH NAIR MEMBER (JUDICIAL)

 

 

 

 

C.L.MAHAR MEMBER (TECHNICAL)